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Mumbai: Making a case for Indian banks to protect their turf from consumer tech companies, Kotak Mahindra Bank chief executive Uday Kotak on Friday said bankers have been short-sighted on the payments business in the last couple of years.

“I am not against competition," Kotak said at the Infinity Forum organized by International Financial Services Centres Authority and Bloomberg.

Indian banks, he said, have allowed the growth of unified payments interface (UPI) payments essentially being monopolized by two players – Google Pay and PhonePe – who have got 85% market share. 

He believes that this loss of market share is a wake-up call for Indian banking. “Wake up or you will see large parts of the traditional financial markets move out. There is also a counter question from a policy and financial stability point of view which policy makers will also have to look at," he said.

According to Kotak, in the last two years, bankers have allowed the payments business being taken away from them by “two or three companies".

“Their standard response was that there is no money in payments. Having said that, we have to keep in mind that consumer tech companies have revenue models outside of finance. For instance, the advertising model or the e-commerce model. Banks, by law, under Section 6 of the Banking Regulation Act cannot get into non-financial business as defined. Therefore, there are serious issues how you are going to draw the lines and simultaneously there is an issue about financial stability," said Kotak.

A section of Indian bankers and policymakers have been circumspect about the relationship between some lenders with large consumer tech companies on the deposit side. Asked about this, Reserve Bank of India (RBI) deputy governor M Rajeshwar Rao had said that this entry of big-techs into the financial sector space is a global phenomenon, which is engaging the attention of central banks around the world.

“In India too, we are examining the issue from the regulatory implications, having regard to the applicable laws and the regulations which are prescribed. So, we are examining this issue," Rao had told reporters on 8 October.

Meanwhile, Kotak on Friday said that the private lender is excited about the fintech space and is seeing opening over 20,000 accounts digitally every day.

“We at Kotak are really focussed on creating five-eight internal startups within the institution and creating a different culture. We are also hiring appropriate talent and giving them the ability to go ahead and experiment in a new world, even if there are financial risks. What we are not compromising on are security and regulation," he added.

On India’s homegrown payments ecosystem, Kotak said that UPI payments as well as our Aadhaar unique identity basis for transactions are remarkable innovations and could be exported globally.

“Frankly, it can be used even in developed countries but certainly in countries which are developing. I would strongly encourage building bridges using these two systems to make India a global financial technology and digital player. I would love to see how these protocols can be built between different countries and different regulators," he said.

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